Lessons from September 2008 Market Hangman

2008_hangman

Exactly eight years ago, the equities market was following a similar pattern as what we have seen so far in August and September 2016. In 2008, it dropped very sharply in the middle of September, a drop very similar to what many are expecting to see this month, which we at Z3 are calling a hangman. If this pattern repeats itself this month, we would see the second hangman within the next few days.

The graph shown above includes three weeks of Dow index closing prices from September 8-26, 2008. Corresponding dates for 2016 are shown below the 2008 dates, but the dates don’t have to line up as long as the pattern holds up. Dates can be pushed forward or backwards.

Here are some things to watch for:

  1. Beware of the weekend because the drop started on a Monday, September 15.
  2. The market dropped 4.4% the first day and closed at the low.
  3. The total drop took 3 trading days to complete and closed very close to the low on the third day.
  4. Beware of the head fake because the market bounced back up 1.6% the second day before continuing the drop on the third day, down 4.1% (based on intraday highs and lows).
  5. The market bounced back very fast, up 4.4% the fourth day and another 4.2% the fifth day.
  6. It finished right where it started. The intraday high on the fifth day, which was Friday September 19, was almost identical to the intraday high the previous Friday, September 12.
  7. After recovering 100% of the drop, the volatility continued and most of the recovery was lost over the next three trading days.

None of these things have to happen again this year, but they might because historical patterns often repeat.

 

James Bailey

Author: James Bailey

James Bailey is an author, business owner, husband and father of two children. His vision is to broadcast the good news of Jesus Christ through blog sites and other media outlets.

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Ed h
Ed h
Member
September 14, 2016 11:55 pm

James,
Thank you for all you do here on Z3. Your site has helped me tremendously and I have learned so much. The people here on Z3 are great and I feel like I’m missing something if I can’t check my phone because of my work schedule.

Unlike 08 I am ready this time , like so many here to be on the right side of the hangman.
God bless you and your family

Julie Bucker
Member
September 14, 2016 9:13 pm

Thank you James for keeping us up to date with these articles.

Cam
Cam
Member
September 15, 2016 10:14 am

Thank you James for this article and all the work you put into it and the others. I know we are expecting the 2nd hangman very soon but does anyone know anything about the timing of the 3rd hangman? I would think it would occur October-November but maybe it’s possible the 3rd hangman is next year? Also, James, (or others) do you plan on being positioned with both FAZ and UVXY for the 3rd hangman or just FAZ? Obviously, it’s (correct me if I’m wrong) at the 3rd hangman that FAZ skyrockets but regarding UVXY would that be the 2nd or 3rd hangman or both where it blasts off?

Phil - Sydney
Phil - Sydney
Member
September 15, 2016 3:40 pm

Thank you James for this article and all the incredible work you put into z3news.
You have been very quiet on the USDCHF trade of late. Have you got any updates on this? Would be appreciated. Still awaiting a strong move above 1.2 but have had to remain Patient. This move may proceed the big US share crash..
God Bless you and your wife

Phil

Mark McGuinnes
Mark McGuinnes
Member
September 15, 2016 8:20 pm

YES +1 Phil! I have been wondering about this trade a lot……and I have had my tail handed to me on a platter from this

Sisterann
Sisterann
Member
September 24, 2016 6:17 pm

Interesting article from Peak Prosperity
https://www.peakprosperity.com/blog/101893/hell-pay

bob
Member
September 18, 2016 5:24 am

james when do you expect gold and silver to drop again and how far down do you think it will go thanks for what you do ……………….bob

Matt NZ
Matt NZ
Member
September 17, 2016 9:33 pm
Mark McGuinnes
Mark McGuinnes
Member
September 15, 2016 8:21 pm

Has anyone though about puts on AMZN (amazon)?!
It seems massively overvalued!

Ed h
Ed h
Member
September 15, 2016 10:10 pm

Mark,
Good call. Yes I have been watching it and Apple. This morning I bought options on AAPL for 9/16 115C. It immediately went up and then dropped so I panicked and sold it. Long story short at end of day those options went up 950%.
Amazon and AAPL have been the shinning stars. Amazons options are too expensive for me. You can do just as well or better with other stock pics in my opinion.

Diana Pulliam
Diana Pulliam
Member
September 15, 2016 9:04 am

Thank you, James!

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